TY - JOUR
T1 - Oil prices and the fiscal policy response in oil-exporting countries
AU - El Anshasy, Amany A.
AU - Bradley, Michael D.
PY - 2012/9
Y1 - 2012/9
N2 - This paper empirically investigates the role that oil prices play in determining fiscal policy in oil-exporting countries. We derive and estimate a fiscal policy equation that links government spending not only to oil price shocks, but also to oil price volatility and the skewness of oil price changes. We find that in the long run, higher oil prices induce larger government size. In the short run, however, government expenditures rise less than proportionately to the increase in oil revenues, reflecting increasing prudence in fiscal policy in oil producing countries. This result is robust to using a variety of specifications of the oil price shock, and to using different sample periods.
AB - This paper empirically investigates the role that oil prices play in determining fiscal policy in oil-exporting countries. We derive and estimate a fiscal policy equation that links government spending not only to oil price shocks, but also to oil price volatility and the skewness of oil price changes. We find that in the long run, higher oil prices induce larger government size. In the short run, however, government expenditures rise less than proportionately to the increase in oil revenues, reflecting increasing prudence in fiscal policy in oil producing countries. This result is robust to using a variety of specifications of the oil price shock, and to using different sample periods.
KW - Fiscal policy
KW - GMM
KW - Oil prices
KW - PMG
UR - http://www.scopus.com/inward/record.url?scp=84865175286&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84865175286&partnerID=8YFLogxK
U2 - 10.1016/j.jpolmod.2011.08.021
DO - 10.1016/j.jpolmod.2011.08.021
M3 - Article
AN - SCOPUS:84865175286
SN - 0161-8938
VL - 34
SP - 605
EP - 620
JO - Journal of Policy Modeling
JF - Journal of Policy Modeling
IS - 5
ER -